Rakesh Jhunjhunwala backed Nazara Technologies IPO (Review and Analysis)
Nazara Technologies IPO (Review and Analysis)
Mumbai based Nazara Technologies IPO would open for subscription on 17th March, 2021. Nazara Technologies is the leading mobile gaming company in India. Company shown strong revenue growth in the last 3.5 years. However, it is incurring losses in the last 15 years. Since Rakesh Jhunjhunwala invested in this company, there is a lot of hype that is getting created in the stock market now. Should you invest in Nazara Technologies IPO then? In this article we would provide Nazara Technologies IPO dates, IPO Details, IPO Price band, market lot, reasons to invest, risk factors, IPO Price valuations and final review whether one should invest or avoid.
About Nazara Technologies Limited
Incorporated in 1999, they are leading diversified gaming and sports media platform company in India. It has presence in India and across emerging and developed global markets such as Africa and North America.
Its offerings are across the interactive gaming, exports and gamified early learning ecosystems, including Cricket Championship and CarromClash in mobile games, Kiddopia in gamified early learning etc.,
The company’s goal is to cater billion plus mobile internet players cross emerging markets who have embraced social multiplayer interactive gaming as the foremost form of entertainment.
The company is putting efforts to grow revenue and profitability concurrently by leveraging its capabilities of in-house content creation, game engine development and technology stack development.
The company has been focused on growing, profitable business, with an emphasis on self-sustainability rather than relying on external investments. This is reflected in fund raising history, where they have raised Rs 126 Mn in 2005/2007 and Rs 765 Mn in 2018. The company has been historically been EBITDA positive and had generated sufficient cash flows from operations resulting in cash/bank balances to the tune of Rs 1,842 Mn as of end of Sep, 2020
About mobile gaming market
Growth in the Indian mobile gaming market will be predominantly characterized by the rising adoption of smartphones, drop in data prices, increased internet penetration, high internet speeds, etc. The mobile gaming market in India is the largest gaming segment and was pegged at USD 0.3 billion in 2016. Being the largest gaming segment in India, this is the fastest growing sector as compared to PC and Console gaming. This segment is valued at USD 1.2 billion in 2020 and is expected to reach a value of USD 3.1 billion by 2023, growing at a healthy CAGR of 39.6% during this period. Being a relatively nascent market, the growth rate for mobile gaming in India closely reflects the growth that China had between 2013 and 2020 (CAGR ~41%).
Compared with the early rise of mobile games in the United States, which has a CAGR of 21% between 2013 and 2020, the Indian mobile gaming market is projected to have a healthy growth in the future.
Nazara Technologies competitive strengths
1) It is one of the leading eSports companies in India
2) India’s top diversified business based on the geographical presence and gaming products
3) It has strong leadership backed by marquee investors
4) Asset light business model
Nazara Technologies IPO Dates, Details and Price Band
|IPO Opening Date||17-Mar-21|
|IPO Closing Date||19-Mar-21|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 4 per equity share|
|IPO Price band||Rs 1100 to 1101 per equity share|
|Market Lot||13 Shares|
|Min Order Quantity||13 Shares|
|Listing at||BSE and NSE|
|Issue Size||Total Rs 582.91 Crores
i) Fresh issue – Nil
ii) OFS – 582.91 Crores
Note: Nazara Technologies IPO Price Band is confirmed now.
Objects of issue
Here are the objects of the IPO issue.
1) Offer for Sale (OFS) – In this, selling shares, holders would sell their shareholding and company would not get any proceeds from this issue.
2) To achieve the benefits of listing on stock exchanges.
Who is selling Nazara Technologies shares through Offer for Sale?
This is a complete offer for sale by the existing selling shareholders. Here are the selling share holders who would sell the shares.
12.67 Lakhs equity shares by IIFL Special Opportunities Fund
10.36 Lakhs equity shares by IIFL Special Opportunities Fund-Series 4
8.73 Lakhs equity shares by IIFL Special Opportunities Fund-Series 5
8.16 Lakhs equity shares by IIFL Special Opportunities Fund-Series 2
6.92 Lakhs equity shares by Mitter Infotech LLP and
3.93 Lakhs equity shares by IIFL Special Opportunities Fund-Series 3
1.5 Lakhs equity shares by Good Game Investment Trust
25K equity shares by Seedfund 2 International
23K equity shares by Porush Jain
14K equity shares by Azimuth Investments
945 equity shares by Seedfund 2 India
Hence, the company will not receive any money from this IPO.
Rakesh Jhunjhunwala, who is one of the largest share holder in the company with 10.8% stake, has decided to stay invested in the company.
Who are the company promoters?
Vikash Mittersain, Nitish Mittersain, and Mitter Infotech LLP are the promoters of the company.
Company Financial Performance
Here are the consolidated revenue and profit details in the last 3 years and 6 months.
|For the year / Period ending||Total Revenues (Rs in Millions)||Profits after tax
(Rs in Millions)
|6 Months ending Sep-20||2,070.0||-101.0||-4.9%|
Its EPS for FY2020 is Rs -0.77 (negative) and last 3 years average EPS is Rs 1.88.
Why to invest in this IPO?
Here are a few reasons to invest.
1) Nazara Technologies is one of diversified mobile gaming companies in India that has presence in developing and emerging global markets. Nazara’s IPO will be the first pure play gaming company that would get listed on stock exchanges.
2) Company has shown strong revenue growth in the last 3.5 years.
3) Rakesh Jhunjhunwala has invested in this company which is creating some buzz in Indian stock market.
Risk Factors of investing in this IPO
1) Company has incurred losses in FY2020 and for 6 months ended Sep-2020
2) One of the group companies has incurred losses in the last 3 financial years
3) Halaplay and Sports Unity have unsecured loans, which may be recalled any time. Such recall loans can have an impact on business
4) They had negative cash flows in the past and may experience in the future too
5) There have been certain instances of non-compliances, including regulatory filings for corporate actions taken by company in the past. They are subject to penalties for such non compliance
6) They are certain proceedings involving company, if determined against them, would have an adverse impact on company business and results of operations
7) Company business operations are conducted from premises which is leased by third party. Its inability to continue operating from such premises may materially affect its business operations
8) Company may not be effectively monitize our eSupports offerings, which may materially and adversely affect company business and results of operations.
9) For complete internal and external risk factors, you can refer the RHP of the company
Nazara Technologies IPO Dates and Listing Date
|Finalization of Allotment||24-Mar-21|
|Initiation of Refunds||25-Mar-21|
|Credit to Demat Account||26-Mar-21|
|IPO Shares Listing Date||30-Mar-21|
How to apply this IPO?
You can login to your demat account, visit IPO section and click on the IPO link of Nazara Technologies Limited. You can then enter minimum lot quantity and price band and then submit.
Nazara Technologies IPO Valuation
Nazara Technologies IPO Price band is Rs 1,100 to Rs 1,101.
1) EPS for FY20 is negative, hence P/E cannot be ascertained
2) For the last 3 years average EPS of Rs 1.88, the P/E works out to 585x.
3) We cannot annualize last 6 months EPS to check P/E, as it incurred losses.
4) There are no listed peers to check whether the issue price is under priced or over priced. However, based on last 3 years P/E of 585x, it is definitely over priced.
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Nazara Technologies IPO Review – Should you invest?
Nazara Technologies is one of the leading mobile gaming company in India that has a presence in emerging and developing countries too. Due to lock-down during covid-19 pandemic, there is massive increase in mobile gaming which opened prospects for the company.
This is the second attempt by company for listing. It made an initial attempt in 2018 by filing DRHP, but withdrawn duet to market conditions.
Company shown strong revenue growth in the last 3.5 years.
However, it has incurred losses in FY20 and 6 months ended Sep-2020.
Nazara Technologies IPO price is over priced.
The offer includes Rs 2 crore worth of company shares to its employees. Eligible employees will get shares at a discount of Rs 110 per share i.e. 10% discount.
Nazara Technologies is backed by Rakesh Jhunjhunwala and a lot of hype is being created in the Indian stock market now.
The biggest beneficiaries in this IPO listing would be IIFL Mutual Funds, which have invested in this company through multiple mutual fund schemes. Of course, even other shareholders would also get benefited with such listing.
I would recommend investors to invest only for listing gains. This IPO is not worth to invest in medium to long term at this point of time. In future if the margins improve and if the company shares are available at lower prices, one can think of investing in them.
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